Transition Into Economic Night

The economic world is always changing, but the 2018-2019 period will mark an important transition. Consider credit market debt, interest rates, stock indices, individual stocks, and several ratios.

TOTAL CREDIT MARKET DEBT per the St. Louis Fed.

That measure of U.S. debt increased exponentially from 1951 to 2007 at a rate of 8.8% per year. However, the rate from 2008 to 2017 has been only 2.6% per year. A sixty-year trend changed during the 2007-08 financial crisis. As suggested by others the U.S. reached debt saturation. The economy has not recovered since the crisis. The graph of credit market debt supports that thesis.

Yes, the stock market is near all-time highs, official unemployment (after “adjustments”) registered a multi-decade low, and official inflation (after “adjustments”) is low but rising. Those measures do not portray the economy for most people.

The U.S. economy runs on credit, corporate debt for stock buybacks, student loans, mortgage debt, auto debt and credit card debt. Slowing a 60 year trend is an important transition. Credit growth slows and the non-financial economy weakens, poverty increases, homelessness rises, drug addiction soars and political polarization goes ballistic. Now is a time for transition. Note: The national debt growth rate did not materially change after the 2008 crisis. Politicians will spend.

IS GOLD INEXPENSIVE COMPARED TO TOTAL CREDIT MARKET DEBT?

Gold prices are low when compared to total credit market debt. Examine a forty-year trend. Expect gold prices to rise as increasing debt devalues the dollar.

INTEREST RATES:

Mortgage rates hit a seven-year high and the 10 Year T-Note yields over 3%. So what?

Total U.S. credit market debt is about $70 trillion. The 10 year rate doubled in the past two years. Suppose that 1.7% increase applied to $70 trillion of debt. The cost to corporations, state and local governments, credit card holders, students etc. would be $1.2 trillion of reduced spending on other necessities.

Miles Franklin sells silver. Call them at 1-800-822-8080 and tell them you agree with the Deviant Investor about silver. Your price will not change, but I might receive a benefit if you give my name as your reference.

If you have questions or comments, email me: deviantinvestor “at” gmail.com.

Gary Christenson is the owner and writer for the popular and contrarian investment site The Deviant Investor and the author of the ...
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Gary Christenson is the owner and writer for the popular and contrarian investment site The Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on The Deviant Investor as well as other popular sites such as 321gold.com, peakprosperity.com, goldseek.com, dollarcollapse.com, brotherjohnf.com, and many others.

Many years ago he did graduate work in physics (all but dissertation), so he strongly believes in analysis, objective facts, and rational decisions based on hard data.